And movies and studio will pay more for a health plan. Global news 25 of the day, powered by more than 2600 journalists and analysts enlightenment hundred 120 countries. From washington, im Alisa Parenti. This is bloomberg. Emily im emily chang back here on Bloomberg Technology. Back. Great to be coming up, apple declares numbers and americas most valuable player misses on revenue. We break down earnings for the Second Quarter. Officiallysoft launches its laptop to battle google and apple for classroom supremacy. We discussed the new Service Laptop with a top exec. And a sitdown with the twitter cfo and ceo with anthony noto, about the companys latest media dealing capitalizing on trump. First, hours Apple Earnings fallingafterhours with short revenues. The iphone has always been the moneymaker, but felt flat yearoveryear. Not surprising, given the anticipation for the next iphone this fall. We are expecting a big design overhaul. Apple also announcing it generated over 7 billion on services in revenue. 18 growth. This is the sector and ceo tim cook says he expects to double over the next four years. Joining me to dig into the earnings, David Kirkpatrick. Great to see you. And angela is with us, analyst at cfr a. I want to start with you. Lets talk about the iphone. Driving two thirds of revenue for the company. Are you concerned that sales were flat . I actually think when you look at the quarter overall, it is rarely mixed. The one negative was the iphone numbers. But its one of those quarters where you can only put so much emphasis on the iphone. You of course have the major launch later this year, and we think the entire myth here can be attributed to the fact that consumers are holding off for the next generation iphone device. Overall, you are seeing a little hint on the stock rice, but it is something we would look past. Emily i spoke with apple cfo luca maestri who spoke of channel inventory, based out of 1. 2 million iphones worth of inventory, which brings the number slightly up. David, what is your take . If i understand correctly, the sales outside of china actually grew. Cook said it is because they were seeing anticipation of future product being a problem. Its amazing to me how in china they are even more status conscious and technology conscious than any other part of the world almost, and they love but i take a big picture view. This is not that big of a deal. If the company can make them move to services and software, which is the shift they have to month ove the multiple up, they will have a wonderful future. I do think they will come out with a great phone in the fall. Emily lets talk about china and we saw a 14 yearoveryear decline in china. Maestri, and he played up the positive signs in china. The iphone 7 was the bestselling smartphone in china. The iphone 7 plus was also doing well, services hitting an alltime record, max business growing double digits. He also expects performance to improve over the fiscal year in china. The second half of last year, they saw a greater decline than they seen so far in this first half of this year. Top to us about whats happening in china and whether or not you are concerned. When it comes to china, consumers are of course a lot more price sensitive. I think you have a lot more options coming out of china, given the emergence of many Device Manufacturers in the region. Ina that being said, when you look at how apple has recently performed in the mainland region, they have actually done very well. It is immoral on the other areas of Greater China like taiwan, among other areas, that has taken a hit for apple. But overall, when you look at the segment, at least it is performing better than it did earlier last year. That is positive. We do think that business starts returning to growth as you progress later into the year and start seeing aesthetic changes to the next generation device. Emily overall, you are also seeing a greater shift to the larger sized iphone. You pointed out this is the first time they have a dramatically updated feature in the camera. This means that average selling price of the iphone is going up. I want to talk about whats going on with capital. They boosted the capital return program, but theres speculation about whether or not apple will bring cash back to the united states. 257 billion apple has in cash overseas. They said they question about whats going on with the trump whether or not that will impact apple. What are your thoughts on this, david . Amazed thate to be a company could be this big, this profitable, and have like they have. I think they will need to be seen as patriotic. If theres a chance to bring money back , they will do that. To me, the real i would go back to what i said before. If i was an investor in apple and i know some analysts have recently been talking about this, can they shift to be seen as more than just a device maker . Their multiple is so low compared to facebook and google, that somehow they have to find a way to change that. They dont even need to make very big of a difference for their stockholders to see an fromdible increase even this astonishing 750 billion market cap. They will bring money back. Have 250 billion to play with is astonishing, but the bigger questions are longerterm. Emily we did ask luca maestri whether they have laid the groundwork or are planning to bring cash back depending on what happens with legislation. He said it is not something to speculate on right now because it depends on the details of what might get connected. We do a lot of scenario planning, but theres nothing to announce today. Any closing thoughts . I think when you look at the numbers overall, we remain very optimistic on the shares. Services growth of 18 , right in line with what we expected, continuing to run in line of the duckling potential over the next four years. Doubling potential over the next four years. Apple continues to expand outside of the iphone revenue stream, and i think thats an enormous positive. Emily angelo zino, i will let you get back on the Apple Earnings call. It just started. Tim cook is speaking. At cfra,no, analyst and david is sticking with me. First Quarter Results coming in better than expected, but the online marketplace is announcing a major restructuring. Ceo Josh Silverman is leaving the Company Along with the chief technology officer. Shares are skidding afterhours trading on the news. Turning in its worst performance in my than a decade in tuesdays session. The stock tumbled 24 . Coming up, we speak with microsofts Corporate Vice president of devices. This is bloomberg. Emily we are continuing to get updates on apples thirdQuarter Results. Ceo tim cook is on the call thing he feels great about this quarters performance and the Services Business is on its way to becoming a fortune 100 company. He says App Store Revenue is up yearoveryear, and developer numbers are up 26 . We will continue to monitor that. It is back to school for microsoft. The tech behemoth has announced the launch of its new Service Brand of device, surface laptop. It is aimed at College Students loyal to apple, and it is a departure from the surface book. Mark gurman got a peek at the new device. Reporter this is the new Microsoft Surface laptop. We got an exclusive sneak peek. This laptop can shake up the market with its 900 900 price point, and a blend of new technologies and cool look. It is lighter than the macbook pounds. Ing in at 2. 76 its also draped in durable fabric that you normally find in highend cars. Theres even battery life that the macbook air by a couple hours. We want to not worry about bringing a power cord with you. Reporter the surface laptop comes with a new operating system, windows 10s. Also comes from the world of cars, a nod to luxury. It is optimized for the new device. Microsoft says it will not go down the computer overtime and gets you to work quickly. You can turn it on and feel it right away. Prorter while they have touch on the market with detachable keyboards, and surface book, the surface laptop is microsofts first your laptop. You can both around quintana. It has touchscreen like a turf surface tablet. You can use your pen on this project. Reporter it also has a funky new mouse you can use separately. I dont think most people would needed. This is the new mouse meant to go flat. If you want to put in your pocket or bag, you can do so. It is bluetooth base. When you put it on, it integrates with your product. Emily that was our Bloomberg Technology reporter mark herman. Joining me in the studio is microsoft Corporate Vice president of devices and services, yusuf mehdi. Tell me about this new laptop. One of the things we are excited about with Microsoft Education is a couple new things. A new version of windows is designed to be more streamlined, simple, and give you better performance. A range of new devices from partners, starting out at 189 with an hp stream, giving you things like pen touch inc. And the ability to run mycroft. Minecraft. Up, its the perfect balance of personalization and performance in a 14. 5 hour, 2. 5 2. 5 pound book. Does, it is 10 as all of windows as you know it. Vr, 3d, pen and ink, but also the apps that come from the store, but none of the drawbacks of crime books. You get to work offline. Office. Full you get the ability to run minecraft. You get rich experiences. I think it leapfrog the call book chrome book. Emily do you think you can get a share of the apple market . I think it has better value mac. Attery life than any it is faster and thinner. The combination of all those things with windows, it is differentiating. Emily apple fans might say they are not so fond of the features of windows 10s. What do you say to those people . The good thing is, with competition you can choose. Apple makes great products. We admire that. You can dos 10s, things you cannot do on other products. Capability, if you like touch, if you like penn, these are unique. Declined ce sales surfaced sales declined considerably. What is the hardware strategy . A couple full. Surface creates new categories of computing. What we want to do is grow the overall windows ecosystem. Hp, dell, new glenn ovi of lenovo. The last quarter we have seen. Ore price competition we are in the middle of a transition. The surface laptop is new today. You might expect to see an update coming soon. Emily the ceo of microsoft said cloud first. Cloud seems to be going really well. Give me the progress on mobile first. We are all in on mobile in the sense that all of our software will run on any device you own. Office will run on iphone and android. Minecraft on iphone and android. We embrace the world as we see today, which is that people use multiple devices and use windows pcs, laptops, and notebooks. Emily windows 10, given update. Its been doing great. Million monthly active, 300 million plus use it every day. It is the fastest adoption incorporations ever seen, and we are seeing great deployment. We couldnt be more thrilled. Emily yousef maybe yusuf thank you, microsoft Vice President of Corporate Services and devices. Based techthe India Company parent plans to hire u. S. Workers. We look at the political and business ramifications next. We are continuing to get updates on apples thirdQuarter Results. Tim cook is still speaking right now, saying there has been beats growth in beef sales. This is bloomberg. Emily a story we are watching looks like jared kushner, President Trumps top adviser and soninlaw, omitted a few items in his government disclosure forms, namely his stake in a real estate tech company. Ashner omitted his stake in company that had ties to Goldman Sachs and george soros. A revised version of the disclosure form that includes the company will be made available once ethics officials have looked into it. Indiabased infosys plans to hire 10,000 americans in the next two years. The hires are part of the outsourcing plan to open tech and innovation hubs in the u. S. Focused on Artificial Intelligence and Machine Learning. Emphasis has announced this as criticism of the Trump Administration at outsourcing firms are unfairly taking jobs from u. S. Workers. Joining us is Bloomberg Technology, editor at large cory johnson. And David Kirkpatrick in washington dc. David, you are in on the party. We will make sure to include you. What is going on with infosys . Cory politics. This is about politics. This is an attempt for emphasis, one of the largest consumers of h1b visas, to get themselves on the right side of the story. It has been going on for quite some time. As one of the reasons President Trump was able to become president , capturing this notion of something gone awry with the american workforce. Infosys is a principal offender. People in the far right media are calling them out as a company stealing american jobs its no accident. With 10,000 people being hired in hubs, especially in indiana, that is a place where President Trump won and Vice President pence health from. They want to make hails from. They want to make a mark for that reason. Emily i know you are looking at the numbers at other companies affected by the policy changes. Cory outsourcing firms are big consumers of h1b visas. There are bigger known Companies Like intel and apple. The biggest consumers are outsourcing firms. We have a graph to demonstrate how these firms are among the biggest consumers of the h1b visas. Emily what jobs are they doing . Cory all caps of jobs. But theres a concern that jobs are replaceable. Theres concerned that they are not unique jobs. When you have companies you can thatrom tata, infosys, these are the kinds of jobs, like tech support jobs, they are not inventing the next driverless car or Optical Semiconductor but it is a support and of job, filling the h1b visas. I think this is seen as an announcement for announcements sake. Emily david, i know you are thinking about this. I think corey is right. As a political move, but it is justifiable. This program has been abused. This is in one where donald trump has it right. Trumpt one where donald has it right. These companies are bringing in people and paying less than american jobs. Somethingorkers make like 50,000 a year more on average than indian outsourcing firms. Even if you are coming in from other countries, 70 of workers are coming from india, even under those circumstances, you will make a lot more working for an american company. Indian companies have a perception problem they have to address. It doesnt surprise me in the slightest. Emily how competitive is h1b visa program . Enormously competitive. There are more applicants than there are spots available. It is a way for some of these people to get green cards and be in the country. Who followedds that route. We have Bloomberg Intelligence analysts who have done that. Fundamentally, what we might expect this changes in the h1b program to fix these problems and the problems of workers getting paid less, coming here and being stuck with these jobs. Its not a way to a better life or for america to continue to lead in technology. Emily this is something Mark Zuckerberg has personally taken on, trying to get more skilled workers into the u. S. How does this affect facebook or google . It doesnt directly affect them that much, but i think what will affect them is if we can find a way to open up the doors to allow more people to come in and do a variety of jobs that are needed with fewer restrictions, while still being able to protect american jobs. That is a tough balancing act. All the Big Tech Companies absolutely feel they would benefit and the American Economy would therefore benefit, if they could bring in more people from outside the u. S. This program was not so severely restricted. Every time someone graduates from stanford, they should staple a green card to the diploma, as john doerr said. Theres a notion about stealing jobs, particularly in technology, and it is an issue. Cory johnson, bloomberg editor at large, and David Kirkpatrick sticking with me. Well talk more about apple. Also, twitter rolling out serious plans to livestream content in news, music and sports. Cfo and coo anthony noto is next. Plus, Apple Earnings after the bell. The company and nothing sold fewer iphones than expected as customers wait for updated models. Headlines,toring the apple stock continuing to edge lower. Alisa im Alisa Parenti in washington, and you are watching Bloomberg Technology. Lets start with a check of first word news. President Vladimir Putin is once again denying moscow to in the u. S. President ial election. He spoke at a joint News Conference today with german chancellor Angela Merkel. Vladimir putin called the accusations rumors. The u. S. Says it has evidence russia was behind the hacking. Meantime, Angela Merkel told Vladimir Putin that eu sanctions will remain in place. The reason lack of progress in settling the conflict in ukraine. They met in sochi, the russian res